Church Legislation: NSW Government Policy

This policy document sets out the matters the NSW Government will consider when determining requests from a religious entity or group to enact new church property trust legislation or amend existing church property trust legislation.

Essential Summary

Church property trust legislation has been enacted over many years for the benefit of particular religious groups to assist in the management of their financial affairs.

The factors that are considered when a church or religious body asks the Government to pass private property trust legislation are:

(1) Whether the entity or group satisfies the criteria of a religion

(2) Whether the membership of the entity or group is sufficient to warrant legislation

(3) The extent of the entity or group’s religious, charitable and educational practices

(4) The nature of those activities, such as whether activities are lawful or could be characterised as being a cult with socially undesirable practices

(5) Whether the extent and form of the entity or group’s property holdings are such as to make legislation a benefit to the church

(6) Whether the entity or group has a clear and generally accepted constitutional structure

(7) Whether there is broad consensus within the community associated with the entity or group as to any proposed legislation before it is introduced

Justice PolicyDate of Effect: 01 October 2013

NSW Government Churches Legislation PolicyPage 1 of 18

Table of Contents

1Scope

2Purpose

3Introduction

3.1Regulation of not-for-profit entities, charitable entities and churches

3.2Not-for-profit Regulation

3.3Advantages to churches of specific church legislation

4Criteria for enacting legislation

Criteria 1. Does the group practice a religion?

Criteria 2: Membership of religious entity sufficient to warrant legislation

Criteria 3 and 4: Extent and nature of religious entity’s activities

Criteria 5: Extent of property holdings

Criteria 6: Clear and well-accepted governance arrangements

Criteria 7: Broad consensus as to any proposed legislation

5Umbrella Act for new church legislation

6Content of church property trust legislation

7Incorporating trustees under church property trust legislation

7.1Government’s approach to incorporating trustees for church property trusts

8Requests by churches to be empowered to incorporate entities

Attachment A – Other Regulatory Regimes

Attachment B – Taxation of not-for-profit entities, charitable entities and churches

9Document information

10Document history

1 Scope

Church property trust legislation has been enacted over many years for the benefit of particular religious groups to assist in the management of their financial affairs. Most church statutes establish a property trust to hold church property. Many establish a corporate trustee of the property trust. A small number of church statutes empower a church to establish further bodies corporate.

The legislation does not confer State recognition that the body is a church or has religious purposes. This reflects the principle of State neutrality in relation to religion. That is, while there is no constitutional separation of church and state in NSW, the Government does not promote an official religion and does not engage preferentially with any particular religious group or institution. The enactment of property trust legislation for the benefit of churches is not intended to alter this principle in any way.

This policy document sets out the matters the NSW Government will consider when determining requests from a religious entity or group for:

  • enactment of new property trust legislation or amendment of existing property trust legislation, and
  • enactment of legislation empowering a religious entity or group to establish bodies corporate.

The document includes background information about the policy context in which church property trust legislation operates.

2 Purpose

The policy provides guidance to officers dealing with requests for new or amended church legislation by setting out the criteria that are considered in assessing such requests. The policy will also provide greater transparency to religious groups who seek new or amended church legislation and should assist in managing expectations about the process of obtaining church legislation.

3 Introduction

3.1 Regulation of not-for-profit entities, charitable entities and churches

Churches and other religious groups are not, in themselves, recognised as legal persons for the purposes of Australian civil law. In order to act in ways that are recognised by Australian law (for example, to own property), religious entities have established structures that are recognised by Australian law.

For example, churches may establish property trusts to hold property on their behalf. The trustees of such property trusts are governed by the general law of trusts except to any extent that the common law is displaced by statute. The law of trusts imposes certain obligations on trustees, which include:

  • obligations to act in good faith, to exercise the powers of trustee for the purpose of the trust and to avoid conflicts of interest, and
  • that trustees are personally liable for the conduct of the trust.

Churches may also decide to incorporate entities to carry out some or all of their activities, including:

  • acting as trustee of a church property trust,
  • engaging employees,
  • entering into contracts, and
  • taking any other actions that may only be taken by a legal person.

A benefit of incorporation is that it limits the personal liability of persons who, in their role as directors of the body corporate, direct the conduct of the trust.

Where a religion uses an incorporated entity, the entity is governed by the statute under which it is incorporated. In NSW, these may include:

  • an incorporated association under the Associations Incorporation Act 2009 (NSW) (‘Associations Incorporation Act’),
  • various kinds of incorporated entities under the Corporations Act 2001 (Cth) (‘Corporations Act’), or
  • an entity incorporated under a specific Act (such as some church property trust legislation).

Where religious bodies choose to incorporate they will be subject to such governance, financial and reporting requirements as apply under the relevant statute. Attachment A summarises some of these requirements.

Religious entities that own property, including incorporated religious entities, are subject to general regulations applying to property owners such as taxation. They may also be entitled to some exemptions from general regulation on the basis of their religious character. Some of the tax exemptions that may be currently available to religious entities are discussed in Attachment B.

3.2 Not-for-profit Regulation

The Commonwealth Government has established a national not-for-profit regulator, the Australian Charities and Not-for-profit Commission (ACNC). Church entities such as church property trusts or corporate trustees will be registrable under the legislation establishing the ACNC. While registration is voluntary, it is required if a charity wishes to access certain benefits including tax concessions. The ACNC Act imposes certain obligations on registered charities. However, exemptions from some ACNC requirements, including obligations to provide annual financial reports and comply with governance standards, are available to ‘basic religious charities’, whose registered purpose is the advancement of religion.

3.3 Advantages to churches of specific church legislation

While there is variation between the different church statutes, broadly, some of the advantages to churches of having a statutory property trust and/or a corporate trustee have included:

  • Alterations to the general powers and liabilities of trustees, such as a reduction in the liability of trustees and powers to alter the purposes for which the trust property is to be used,
  • Avoidance of regulatory requirements imposed on bodies corporate established under general incorporation legislation,
  • Exemptions from other regulatory requirements, such as statutory waiver of obligations to pay duty on the vesting of property under the Duties Act 1997”[1].

4 Criteria for enacting legislation

The factors that are considered when a church or religious body asks the Government to pass private property trust legislation are:

(1) Whether the entity or group satisfies the criteria of a religion.

(2) Whether the membership of the entity or group is sufficient to warrant legislation.

(3) The extent of the entity or group’s religious, charitable and educational practices.

(4) The nature of those activities, such as whether activities are lawful or could be characterised as being a cult with socially undesirable practices.

(5) Whether the extent and form of the entity or group’s property holdings are such as to make legislation a benefit to the church.

(6) Whether the entity or group has a clear and generally accepted constitutional structure.

(7) Whether there is broad consensus within the community associated with the entity or group as to any proposed legislation before it is introduced.

Religious entity must show that it satisfies each criteria: The onus falls on the entity or group to show that it satisfies each of these requirements. Each criteria is expanded upon in further detail below.

Criteria 1. Does the group practice a religion?

There are a number of considerations the Government will take into account in deciding whether a religious entity has shown that it practices a ‘religion’. For example, the High Court of Australia has stated that the characteristics of a ‘religion’ are:

  • a belief in a supernatural being, thing or principle, not necessarily a god, and
  • the acceptance of canons of conduct in order to give effect to that belief.[2]

However, the mere fact that a group of people follow a common religion does not make the group a church or other religious institution. As stated by Mason ACJ and Brennan J in the Scientology case, ‘It does not follow that the common religion of a group stamps a religious character on an institution founded, maintained or staffed by members of that group or that the purpose or activity of such an institution is religious’. However, the purposes for which an organisation was formed and the activities that it carries out may be relevant in determining whether it is a religious institution. These matters are also relevant to criteria 3 and 4.

In determining this issue the Government may consider publicly available sources that have a bearing on the question. For example, the Government may consider whether the religion is recognised for the purposes of the Marriage Act 1961 (Cth) and religious classifications used for the purposes of the census.

The Government will consider enacting legislation for groups that satisfy the condition of being a ‘religion’. However, the fact that a group satisfies the test is not decisive. For example, the Government will not enact church property trust legislation for religious groups if the group’s ‘canons of conduct’ are inconsistent with the laws of NSW.

Criteria 2: Membership of religious entity sufficient to warrant legislation

Whether a religious group legitimately requires special legislation to assist in the management of their financial affairs should not be determined by reference to an arbitrary minimum number of participants.

Nevertheless, if only relatively few people identify as members of a religious group (for example, less than several thousand) it will be harder to establish that it is a legitimate use of government resources to support and administer specific legislation. The preparation of property trust legislation and subsequent requests for amendment require a significant amount of Departmental work and Parliamentary time. In each case the benefits of such legislation need to be measured against the Government’s responsibilities to develop and implement Government priorities with a wider community impact.

In determining whether a group has shown that it has sufficient membership to warrant legislation, the Government may also consult publicly available sources regarding the number of people in NSW with a particular religious affiliation.

For example, the Australian Bureau of Statistics collects census data on religious affiliation. The Australian Standard Classification of Religious Groups provides the basic classification according to which demographic information about religious affiliation is collated. In the 2006 census information was collected on religious affiliations ranging in size from 3 persons to 1,813,602 people. Such information may be considered by the Government in considering whether the size of the body seeking specific legislation is sufficient to warrant the expenditure of Government resources.

Criteria 3 and 4: Extent and nature of religious entity’s activities

The Government will generally support the enactment of property trust legislation for churches only where the activities for which the trust property is used are broadly charitable purposes. At common law a ‘charitable purpose’ may include:

  • relief of poverty
  • advancement of education
  • advancement of religion, or
  • other purposes beneficial to the community.

In addition, the activity must be carried out for the benefit of the public.

The Government will support the enactment of legislation only where the activities of the entity are lawful.

Criteria 5: Extent of property holdings

Typically, a church would need to have a number of properties of substantial value to justify the expenditure of resources in enacting legislation.

Churches requesting new legislation may be required by the Government to provide evidence of:

  • the value of the property proposed to be vested by legislation in the statutory trust, and/or
  • the current and/or projected use of the property, including any income generated (or expected to be generated) by the use of the property.

Criteria 6: Clear and well-accepted governance arrangements

The church entity requesting legislation must have a clear and generally accepted constitutional structure. It must have governing documents that are available to its membership and these must include clear and transparent processes for making decisions that would apply to matters including the use and disposition of the proposed trust property. Copies of governing documents should be provided to the Government.

Criteria 7: Broad consensus as to any proposed legislation

A religious entity must prove that there is broad consensus within the church community regarding any proposed legislation before the Government consents to introduce it into Parliament.

The history of church legislation in NSW demonstrates that this criterion may be difficult for some emerging churches to satisfy, particularly in cases where a number of people or organisations claim to be the representatives of a particular religious community.

In such circumstances there is a danger that, by enacting church property trust legislation for one group, the Government could inappropriately re-distribute ownership of contested property or alter the balance of powers between persons with claims to control the use of such property. The Government must be absolutely certain that it does not enact legislation in a way that would create or alter property rights of members of religious groups in a way that is not intended by all of the members of the group.

Where there is conflict over authority within a religious community there is a further danger that, by enacting church property trust legislation for one group, the Government could inadvertently confer an impression of greater authority or authenticity on one group as compared to others. This is not a legitimate function for Government legislation.

Case Study: the Macedonian Orthodox Church Property Trust Bill 2010

The Macedonian Orthodox Church Property Trust Bill 2010 was introduced into the NSW Legislative Council by the Revd the Hon Fred Nile MLC on 10 June 2010. It was subsequently referred to the Legislative Council General Purpose Standing Committee No.3 for inquiry and report.

During the course of the inquiry it became apparent that there was a history of conflict within the Church, including ongoing litigation about the ownership and control of Church property at the time the bill was introduced. The Committee reported that there was substantial opposition within the Macedonian Orthodox community in NSW to the passage of the Bill. A large number of submissions were received from within the community both for and against the bill. Those opposing the Bill alleged a lack of consultation by the Church with the local Church communities before the introduction of the Bill in Parliament. The Committee’s Report concluded that any legislative solution was inappropriate in those circumstances.[3]

The Committee concluded that there should be broad consensus within a particular Church community as to any proposed legislation before it is introduced.

What is required to satisfy this criterion will vary depending on the circumstances of the case, including whether there is division within a religious community or a history of disagreement regarding a request for legislation.

Broadly, the Government will require that the church demonstrate that both the governing bodies of a church and a substantial majority of the members of the church understand and support the terms of the request for legislation. This will usually require that a church adopt a process to inform the membership about the request for legislation and for the members to have an opportunity to approve or reject the proposal. The onus will be on the church to conduct the appropriate inquiries and gather the relevant evidence to satisfy the Government’s requirements.

5 Umbrella Act for new church legislation

Variations in the size, internal governance structures and activities of religious bodies means that varied approaches to holding property and the legal status of church entities have been adopted for different religious entities.

However, where new church property trust legislation is requested, particularly for smaller churches, the Government intends to develop an alternative approach. Over time, the Government will develop an umbrella Act under which the benefits of legislation can be provided to a number of churches through a single Act, with any provisions required for particular churches included in schedules.

The Government considers that this more streamlined approach will provide the benefits of greater regulatory uniformity and certainty, while at the same time continuing to provide the advantages of statutory property trusts to smaller churches.

6 Content of church property trust legislation

The Government establishes statutory property trusts for churches because of the basically charitable nature of church activities. The purpose of church property trust legislation is to provide churches with a flexible structure to hold and deal with church property for the purposes of the church.

While church property trust legislation may include provisions specific to the needs of churches, the general law applying to charitable trusts will continue to apply.